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Watching Paint Dry. Illogically.

As one reader put it earlier today, “is just being open for trading” a good enough reason for stocks to rally?

The answer, apparently, is “yes.” Because by God equities rallied across the globe on Monday with Wall Street taking its cues from Europe and Europe taking its cues from Asia which took its cues from last week, etc. etc. Lots of cue taking. Three round numbers this year for the S&P:

Treasurys sold off. As Bloomberg notes, “10Y yields topped out just ahead their 2.237% 100-DMA.” Yields are now up nearly 22bps off the lows hit ahead of Irma and North Korea’s founding day:

Not a great day for gold or the yen as havens continue to be out of favor barring fresh signs that the apocalypse is upon us (which, incidentally, there are plenty of as more hurricanes are coming and as Kim gets more belligerent):

The dollar was up against most of its G-10 peers. USDCAD spiked hard after BOC Deputy Governor Timothy Lane said policymakers are watching the loonie:

LANE: BOC TO TAKE CANADIAN DOLLAR INTO ACCOUNT `STRONGLY’ [BIGLY]

In a speech in Washington on Monday, Carney rolled out the “limited and gradual” language to describe the likely path of BoE hikes and that cooled off the red-hot pound which earlier hit a 15-month high:

European shares were up across the board, hitting 6-week highs:

Bitcoin has been, well, it’s been Bitcoin, bouncing “bigly” off its post-Dimon/China crackdown lows, despite new reports suggesting Beijing is about to tighten the screws even further:

Bloomberg’s Stephen Kirkland thought you might like to know what the best trading strategy for Bitcoin is, so he wrote this for you:

What’s the best trading strategy for Bitcoin as it rebounds nearly 20% in the last two sessions? The obvious answer for something that’s jumped more than 500% in the past year is buy and hold. That’s followed by momentum indicator MACD, Variable MA and Fear & Greed. These three scored “profit” exceeding 200%. The bad news is trading, where these strategies involving switching between long or short positions, with as many as 23 flip-flops for Variable MA compared with one for B&H, according to Bloomberg backtesting rankings. Knowing the best strategy hasn’t been so easy under the choppier market conditions of the past four months. The B&H strategy dropped to third place up 111% and the top two performers, Bollinger Bands and Trading Envelopes, gave a profit of more 125% and no more than 4 trades. By the way, Bollinger Bands signaled go long on Sept. 15.

Here’s an annotated bubble phases chart from FT (“you are here”):

And in a true testament to Kim’s waning capacity to create market turmoil (and thus to further his side career as a VIX ETP day trader), South Korean shares had their best day since May:

S&P has now gone 445 days without a 5% pullback:

Oh, and in case you missed it over the weekend, VIX ETP feedback risk is now at an all-time high (left pane):

As you look ahead to Wednesday and the official announcement of Fed balance sheet runoff, do keep the following in mind from Pimco’s Anthony Crescenzi:

It’s illogical to think that quantitative easing would help markets but quantitative tightening won’t hurt.

It seems markets are taking the Fed’s quantitative tightening in stride. It will be like Fed Chair Janet Yellen has said, like watching paint dry.

Writing about a subject is the best
way to educate yourself about it, and when I flick through past work I remember how much
they taught me, if no one else. Mainly they taught me that I didn’t know very much. But they
also taught me that most other people didn’t know much either. Thus, some key themes
which stand out include the illusory control of policy makers, the presumed knowledge of
those looking to them to actively do good, the ease with which we fool ourselves, and how
best to protect capital in the face of such unavoidable uncertainty. -- Dylan Grice